Stocks Mentioned Valaris (VAL), Transocean (RIG), Seadrill (SDRL), Noble (NE), Borr Drilling (BORR), Saipem (SPM.MI), TotalEnergies (TTE), Nvidia (NVDA), Super Micro Computer (SMCI), Costco (COST), Oracle (ORCL), Okeanis Eco Tankers (OET.OL; ECO), NexGen Energy (NXE), Cameco (CCJ), Nordic American Tankers (NAT), MicroStrategy (MSTR), Chevron (CVX), Bitfarms (BITF), DHT Holdings (DHT), Ur-Energy (URG), Dampskibsselskabet Norden A/S (DNORD.CO), Palantir Technologies (PLTR)
Highlights
December 01, 2024
Is China reflating?
China announces a massive stimulus and relaxes mortgage rules. Steel production ramps up. Is the rally sustainable? Will Simandou coming online lead to permanently lower iron ore prices? Time will tell.
This is a trend that bears watching.
December 02, 2024
Valaris pushes the goalposts again
Valaris (VAL) Q3 call:
"We mentioned on our last conference call that VALARIS jackups 147 and 148, which were leased to ARO, had received contract suspension notices from Aramco. Together with ARO, we elected to terminate these contracts and the rigs are now stacked in the UAE alongside VALARIS 143. We intend to keep these rigs preservation stacked until we see sufficiently attractive opportunities that warrant making the necessary investment to bring them back into our active fleet.
We have 5 rigs leased to ARO that are due to complete their existing contracts at the end of 2024 or in 2025. And we are in active discussions with Aramco about extending these rigs.
In the North Sea, market conditions remained balanced with all 20 active jackups in the U.K., Danish and Dutch sectors currently contracted and just 3 rigs stacked in the region. Despite some long anticipated changes to the energy profits levy in the U.K., which were confirmed yesterday in the new U.K. budget, we see continued customer interest in the region [really? I have a hard time believing that], including multiyear opportunities that are expected to start in late 2025 or early 2026".
The good news is the balance sheet is fine and the stock is finally cheap.
The bad news - no catalyst to jump start a new uptrend.
Absent a catalyst, the stock can keep cutting through one support level after another. Even worse - they decide on M&A to compete with Transocean (RIG) - Seadrill (SDRL) or Noble (NE) - Diamond Offshore (DO), using shares as currency.
I'm exiting my position.
I'll still have exposure to offshore via Borr Drilling (BORR) and Saipem (SPM.MI). Borr is simply too cheap, and Saipem has a $1.9 bn contract on TotalEnergies (TTE) Block 58 in Suriname.
After losing money on Ensco, Ensco-Rowan, Valaris 1 and Valaris 2, I think I should get an award for being The Eternal Optimist. Or have my head examined. Or both.
Nvidia
What are the odds Nvidia (NVDA) is announcing its Big Bath exactly as intended?
"At some point, we [Nvidia] will announce a temporary hit to gross margins as we phase out Grace Hopper/ H100/ Blackwell in favor of The New, New Thing, clean up the balance sheet, and then resume playing the game."
We're at the end game of the AI bubble. I reckon the Mag 7, and the indices, will hold up right until the Inauguration, at which point it'll be Trump's mess to deal with.
Gary Gensler, after turning a blind eye to the whole scam, will retire into the sunset and no doubt book millions of dollars in speaking and consulting fees.
Insiders will cash out as much as they can without inviting legal trouble.
The hedge funds that fueled this trade by getting banks and PE funds to lend against depreciating inventory will win again with put options. [Can you buy a CDS against your own fund?]
The indexers and closet indexers who succumbed to FOMO will be left holding the bag. And Trump will get blamed for being too market friendly and allowing Corporate America to get away with fraud.
It is the same playbook the economists and politicians used while blaming Herbert Hoover for causing The Great Depression. The Roaring '20s stock market bubble happened under Calvin Coolidge's watch but Hoover, a rich, successful businessman and the quintessential outsider, was blamed for the mess he happened to inherit.
There you have it, folks. The fat lady is warming up her vocal cords.
December 03, 2024
Giving up on long short equities
Super Micro (SMCI) investigates itself, finds nothing wrong, and keeps pumping. The stock is now up 150% and is still a part of the S&P 500 instead of being de-listed.
The effort involved in finding and calling out frauds like NVDA and SMCI isn't paying off. Markets tend to mean revert and maybe there will come a time when shorting frauds (and AI bubble stocks) makes more money than YOLOing bitcoin, MSTR or Palantir.
I spend December reflecting on the year's trading. Apart from the SMCI short, all my big winners this year have been on the long side - Solana, Ethereum, bonds, yen, gold explorers, copper miners, Chinese tech, and special situations.
My time is better spent on researching the long ideas than the short ideas. Solana, for instance, was a 11x from my June 2023 entry. Even if Nvidia goes to zero the gains won't compare - and it took up more of my time.
I think Long/Short equities is fundamentally broken. Unlimited QE, gamma squeezes, irrational behavior, and just plain fraud being rewarded with passive flows, has changed the game.
Starting next year, new research will be long only. There is so much value in gold, copper, shipping, energy, even software (tech bulls think AI kills software companies).
I'm giving up on short-side alpha and riding the stagflation wave. Even if Trump cleans house, I won't be back.
P.S. It's not just tech or AI. Costco (COST) is trading at 1.7x sales, 60 times earnings, and 18 times book value. The valuation 'should' mean revert but that uptrend is impossible to short. The stock is up 64% YTD. After a 43% gain last year.
I try to find technical breakdowns to short but those have gotten a lot rarer.
Perhaps the one stock that best illustrates how broken markets are is Oracle (ORCL). A half a trillion market cap company moving like its investors are schizophrenic.
How do you beat the game? By not playing.
December 04, 2024
Seeing this happening in Norway reminded me of a conversation I had with a mining executive working on a project in South America. We were talking about Cobre Panama, which was approx. 3% of Panama's GDP, and he happened to mention that this would never happen at his project.
Me: "How so?"
Without missing a beat, he replied: "Because the people are poorer here".
The community at the mine site had seen how other mines in the country transformed the locality and his company had taken them on tours to other mining towns, gaining social license well ahead of permitting. The people want the prestigious jobs the company can provide.
Norway, which was built on oil wealth, is holding itself hostage to greenies who probably wear North Face hoodies made with petrochemicals. And the country is too rich to care, which actually makes it a worse jurisdiction to invest in than the poorer parts of the world where people desire capitalism.
Of course, you have to pick your spots, but I expect my 10-baggers in this cycle to come from the jurisdictions that are seen as "risky".
Okeanis Eco Tankers is a buy
Potential bear trap and bullish reversal with a gap up after 4 inside days in Okeanis Eco Tankers (OET.OL; ECO). (Say that out loud in one breath)
You can see my reckless purchase (green area) with no thought given to the technical breakdown.
The difference between a trader and a CMT is not in the TA. It is in these decisions.
Can you be contrarian at times like this if you don't understand the fundamentals and know the company well? I think not. More importantly, will you hold the stock for a year if it's in a messy uptrend?
I can trade completely off TA and make money. But understanding the fundamentals gives me the benefit of a longer holding period, which means less screen time.
Gensler's forgotten legacy
Chanced across this old ad today while scrolling through photos. Struck me that Gary Gensler is the only regulator who's managed to harm the futures market, the stock market, and the crypto industry.
NexGen's marketing team exposes Cameco's incompetence
NexGen Energy (NXE) vs Cameco (CCJ) deal team. NXE has locked in a $80 floor 9 years out, while CCJ can't even see that number except as a distant dream.
Cameco is to uranium what Anglogold was to gold in the late '90s. Anglo's hedge book made it suffer losses when gold rose. Cameco's hedge book - to be fulfilled from spot purchases - guarantees it'll lose money as uranium rises.
How can management teams get it so wrong? That's just how it is in the mining business.
Nordic American Tankers
I bought Nordic American Tankers (NAT), a stock I haven't owned in 4 years. Not cheap, but the best play on the Suezmax rate recovery being reported by Fearnleys.
Chart looks like the stock is headed to zero. Let's see how this turns out.
December 05, 2024
Feint Left, Turn Right - how the oil bulls painted the tape
Say you're an oil bull. You get long Sep '25 crude at a 2.6% discount to spot, short a ton of the front month to create this headline, and make the spread widen, giving you an even bigger win and liquidity to cash out the short position or roll it.
This is not a bearish bet.
New Fortress Energy
New Fortress Energy (NFE) up another 7% today. Going by TA, the move is just getting started.
Subscribers are up 37% since my write-up on October 23, but that's not the real value. I can have 50 positions and show great gains on 20 of them. This is my biggest position and one I've stalked for years.
Finding good setups, sizing them right, constructing a portfolio - that's the real alpha that subscribers pay for.
Bitcoin
Bitcoin is supposed to be about changing the world or some such nonsense, but the bitcoin cult seems more bent on mocking me than popping champagne or sharing an intimate moment with their partner (do you guys have one or do you put everyone off by ranting about Peter Schiff and the Fed?).
This was my preferred play for this upswing. Out at ~$220.
You can have the first 20% and the last 20%. I'm happy capturing the meat in the middle and moving on. Crypto portfolio is still at 100% cash.
Bitcoin bulls should note that Alex Mashinsky of Celsius may go to prison for as much as 30 years. Misleading investors by promising BTC "yield" won't be looked upon kindly once the cycle turns.
P.S. If you have a win, for God's sake stop trolling on FinTwit and go down a glass or two. The good times don't last forever.
December 06, 2024
My 2025 prediction for the hedge fund industry
The good news is, it'll get a heck of a lot easier to outperform the S&P 500.
The bad news is, LPs will no longer care about the S&P 500. Consensus is already building on that.
The benchmark will shift to the other guy who has similar world views but beats your fund's performance.
Closet indexing is out, fundamentals and active management are in.
MicroStrategy
I have a question on MicroStrategy (MSTR) - can you operate a modern day version of a Ponzi scheme using a company that's classified under SIC code 7372 for Services - Prepackaged Software?
There's no SIC Code for Services - Modified Ponzi (I checked).
The SEC went after Ripple, Uniswap, etc. on the pretext of crypto being securities. How is it that Saylor
gets a free pass for pretending to run a software business while he's simply blowing out the company balance sheet and betting it all on black at the crypto casino?
Why is the SEC allowing a company to make up a bogus metric like "BTC yield" and mis-sell securities to investors on the strength of it?
Creating artificial demand for a commodity isn't wrong, since bitcoin has no use value. When Enron artificially inflated nat gas prices or California power prices, they hurt consumers who were reliant on fair markets. No one, except those who choose to voluntarily participate in the bitcoin bubble, lose from Saylor's antics. So that part of the scam is fine from a legal angle (I think).
Telling investors to buy MSTR shares at 3x current NAV, in hopes that they can sell at a profit to the greater fool - that's honest marketing. Fools and their money.
But running a business that issues securities to buy assets, without registering under the Investment Company Act - is that legal?
Legality aside, is there any proof that MSTR actually owns any of the bitcoin they say they do?
Anything on-chain that can be verified?
Are their assets being re-hypotheticated and used as collateral to juice the bitcoin price further?
I hope KPMG is asking these questions instead of simply rubber stamping the company's accounts. E&Y and Deloitte firing Super Micro Computer (SMCI) should put the rest of the Big 4 on notice.
Trump - Bullish for oil stocks or oil prices?
Trump: Drill baby drill.
Chevron (CVX): The company’s 2025 capex and affiliate capex budgets represent a $2 billion year-over-year reduction. Permian Basin spend is lower than the 2024 budget and anticipated to be between $4.5 and $5.0 billion as production growth is reduced in favor of free cash flow.
In 2021, tech and crypto were enjoying a big bull run while oil was edging higher in the background. Come 2022, the money was in oil and shipping.
In 2024, tech and crypto are enjoying a big bull run while oil has been left for dead and tankers are simply rusting steel on water. Come 2025.....
Bitcoin
"BTC is a purely speculative meme-coin with ZERO utility"
I have been saying this for a while now. Glad to see rational discussion on this.
My view is ETH becomes the stable chain used for tokenized treasuries and other RWAs, while SOL becomes the go-to chain for innovators, bootstrapped projects, NFTs, and anything that requires fast and cheap confirmation.
It's winner take all, so I'd just ignore SUI and any of the other overhyped VC coins. AVAX has a niche use case, so it can last but not dominate.
Plenty of projects tried to market themselves as "ETH Killers" in 2017-18. None succeeded, not because they had flawed tech, but because they couldn't compete with ETH as a SoV for ICO teams' ERC-20 launches.
No one I know who's been in crypto for a few cycles owns any bitcoin. It was great when 7 tps and six blocks confirmation for finality was "cool".
I used to own a lot of floppy discs and 8-bit video game cartridges when I was 8 years old. It is absurd to think there are still "bitcoin maxis" around, when their legacy tech has objectively been surpassed a long time ago by other chains with better scaling capabilities and none of the flaws inherent in bitcoin's PoW design.
Bitcoin isn't money. It isn't even a currency. It is just a legacy technology that's found a new audience who are using it as a leveraged playtoy. An audience who have no clue about crypto or the killer apps that are emerging from 8 years of innovation.
Super Micro Computer update
The Nasdaq has decided to reward accounting fraud Super Micro Computer (SMCI) by allowing it to flout the rules and remain listed.
The foxes have the keys to the henhouse.
How to play this? Not by screaming into the wind, but by buying physical gold and disconnecting. When the US capital markets lose credibility, everyone will flock to gold. I'm just going to get there well before the move begins.
Bre-X was a pivotal moment for Canadian securities markets. SMCI and NVDA accounting fraud will be a pivotal moment for the US stock market.
December 08, 2024
Legacy tech rules!
The first ever internet connection I used was KMR online. It was a 56 kbps dial-up. I still use it to this day to access the internet.
Just kidding. I use a 500 mbps fiber optic connection.
The first ever crypto transaction I did was on the bitcoin network. It has a processing speed of 7 transactions per second (unchanged since 2009), takes about an hour to achieve finality, and costs $1-$2 in fees when there's no congestion. I still use it to this day to send and receive payments.
Just kidding. I use USDT on Solana and Tron for near instant confirmation at a cost of one cent.
I hear bitcoin is still around and has rebranded itself as a Saylor/BlackRock branded coin. Maybe I should get some, just in case it becomes a valuable antique.
Bitcoin
Bitcoin is not digital pyrite. Pyrite ore can contain recoverable gold.
Bitcoin was simply a great experiment that tried to mimic the properties of gold for a digital age - and failed at the task.
I'm fond of it the same way I'm fond of my old SEGA video game cartridges but I'm certainly not going to compare a 7 tps legacy blockchain with the hardest monetary asset known to man.
December 10, 2024
SEC charges Bitcoin miner with accounting fraud
Bitcoin miner Bitfarms (BITF) announces a restatement of its 2022 and 2023 financials due to a material error in the classification of proceeds derived from the sale of digital assets.
"The Company’s management has previously concluded that the Company had a material weakness in its internal control over financial reporting during the Restatement Periods".
The company reported positive operating cash flow (OCF) by including proceeds from the sale of investments in OCF instead of cash flow from investing activities.
To compare, it's like McDonald's decided to shut down a few restaurants and booked the profit from sale of real estate in OCF while classifying its real estate as an investment on the balance sheet. Investors are fooled into thinking the burger and fries business is gushing cash but end up paying a FCF multiple on those land sales.
Glad to see the SEC starting to wake up from its slumber. When NVDA?
December 12, 2024
Oil Tankers: the clean-dirty rotation comes full circle
In 2020, clean tankers (product carriers) entered the dirty trade because VLCCs started minting money.
In 2024, VLCCs entered the clean trade, taking advantage of longer distances due to the closure of the Red Sea.
Markets come full circle.
VLCC rates are so terrible DHT Holdings (DHT) is now a $9 stock. There are so many bargains in shipping that I'm having as much fun as a kid in a candy shop.
It's a wonderful time to be an investor and take the long view, ignoring the charts.
Bitcoin
Buy the [supposedly] best performing asset on the planet.
Not enough? Buy leveraged exposure to the best performing asset MSTR.
Still not enough? Buy a 2x leveraged ETF on leveraged exposure to bitcoin MSTU.
Still not enough? Buy OTM call options on the 2x leveraged ETF on leveraged exposure to bitcoin.
Take out a credit card loan and buy more on the way up, getting leveraged at a personal level.
Successfully rotate between all these instruments and make money during a bull run. Pat yourself on the back for a job well done.
Forget to take profits and exit 'cos bitcoin goes up forever. Say stupid stuff like bitcoin is the exit strategy, repeat it enough times you start believing it.
Blow up when the trend turns.
In 2022, it took 5 days for the entire Terra Luna ecosystem to go to zero. Risk happens fast in crypto. A new breed of investors will learn this lesson this cycle.
December 13, 2024
Gold: An affectionate love story
I bought my first gold bar in June 2014, right before my 25th birthday. I had saved up for an entire year in order to afford the purchase. I still own that gold bar.
Over the years, I've bought and sold plenty of assets and made several thousand trades. I've even sold gold and silver, but not that particular bar.
I look at it to remind myself that some assets can truly be held forever.
Stocks for the long run sounds great in theory, but aside from forced savings plans, does anyone except Warren Buffet (and perhaps Seth Klarman) actually manage to hold forever?
Nobody does because it is not possible. Visit India and talk to middle class folks, and they will all own gold that has been passed down from one generation to the next.
Gold is the only asset where the holding period is forever.
Bitcoin
Painting the tape to make everything appear great is not a new tactic. Bitcoin is simply the latest beneficiary of such an attempt.
BitConnect had its fair share of enthusiastic social media followers who did their best to drown out opposing voices. The scam unravelled because, well, all scams eventually do.
December 14, 2024
Uranium
I've been in and out of uranium stocks since 2015. My gains in Ur-Energy (URG) paid for my honeymoon.
The trick to navigating this sector is not getting too attached to the sector. FinTwit creates echo chambers which makes it hard to dissociate from all the nice people who are in the same trade and don't want to see you exit. But timing exits is the key to making money and keeping it.
I exited uranium early this year, pivoted to gold, and never looked back. With SPUT and Yellowcake now trading at a discount to NAV, and Sprott announcing a new ATM program, we're probably weeks or months away from the bottom. This is now a sector to watch with interest.
December 15, 2024
Go woke, go broke. Germany is in recession and is paying a steep price for importing electricity. Why? Because the morons in charge decided to substitute coal with wind and solar, and stood idly by as the Americans blew up Nord Stream 2.
December 16, 2024
December 17, 2024
The bubbles always win
The ones who are long the bubble lose it all when it bursts - or worse, get into debt. The ones who refuse to participate lose heart because it just feels like the irrational exuberance can last forever, and nobody wants to spend their life being Mike Wilson or Peter Schiff.
The gamification of investing, 0DTE options, meme stocks and coins - these are symptoms of a society addicted to gambling because normal people see no way of getting ahead other than by risking it all on a whim. The rise of OnlyFans is not moral decay - it is desperation.
The parallels between what we're witnessing today, and the early stages of Weimar Germany's hyperinflation, as captured in the book When Money Dies, is so sobering that I can't stop thinking about it.
This is the environment the Fed thinks warrants rates cuts and more QE.
God help us all.
Value over momentum
The bitcoin bugs are buying BTC because it goes up every day. I buy value stocks which go down every day. We are not the same.
I couldn't enunciate Dampskibsselskabet Norden A/S (DNORD.CO) if my life depended on it but I love buying a 545 DKK NAV stock at 195 DKK.
Incidentally, the name means Steam Ship Company of the North.
December 19, 2024
Ueda throws Japenese people under the bus
Bank of Japan holds rates steady because old people living off their savings need to exhaust it sooner, or live out their long years terrified that they will outlive their capital.
All so the yen carry trade can continue to feed the US stock market bubble.
Billion dollar farts
Fartcoin is now worth a cool billion dollars.
Japenese Yen
In the last 3 months, the Japanese Yen is down 10.7% vs the dollar. The yen touched 157, a level last seen in 1990 when they entered debt deflation. The aging population which has gotten used to status quo prices is going to be hit with high inflation because Ueda won't even hike rates to 0.5% for fear of upsetting the yen carry traders.
No amount of jawboning can save the yen now. Their only option is a massive currency intervention to stem the quick fall to 160.
December 22, 2024
It's the holidays and it's the time of year when I catch up with old friends. I had a curious conversation with a non-finance MBA friend which went something like this:
Him: "So where are you investing now? Where is value?"
Me: "In commodities and shipping. My biggest allocation outside small cap gold stocks is dry bulk. Ships that transport iron ore, bauxite, coal, etc."
Him: "But China is in recession, Europe is in recession, India is in an inflationary recession. Demand for the physical stuff isn't coming back. Commodities may be value but it's dead money. Better to own stocks, gold and crypto."
This conversation has been on my mind since I woke up this morning.
I agree that EU and China are in recession. Taking that line of thinking further, the S&P 500 should be impacted given their heavy exposure to international markets. Crypto is a global phenomenon but the biggest player (ex-BTC) is South Korean retail investors. Why should crypto do well in a recession?
Are investors too dismissive of commodities on recession fears but wearing rose colored goggles when it comes to whatever is trending? I believe so.
When the price action changes, the narrative will change.
"Inflation is coming back, so buy commodities".
"Central banks can print money but not copper, so buy copper".
Rusting steel on water at 5x free cash flow is better value than Palantir Technologies (PLTR) at 73x sales and 402x earnings.
December 23, 2024
Shipbuilding orders boom
"Owners plowed more than $188 billion into newbuilds in the first 11 months of the year, on course for the strongest pace in terms of both value and capacity since 2007, according to Clarksons.
Two of the world’s three largest shipbuilders say customers would need to wait until 2028 to receive new ships ordered today".
The orderbook is heavily tilted towards gas carriers and containerships. My current focus? Dry bulk and tankers. Dry bulk is not very profitable for the shipyards, and investor outlook is too pessimistic given all the China recession fears. As for tankers, I expect the Red Sea to remain shut down, increasing ton-miles. VLCCs going from 'dirty' to 'clean' shows how lucrative the product tanker trade is, again despite all the recession fears.
At this point, you can pretty much toss a dart and pick a shipping stock that'll go up in 2025.
Solana:Bitcoin :: Windows:DOS
The year is 2010. The bitcoin network, run by a few nerds on home computers, processes a maximum of 3 transactions per second (tps).
The year is 2025. The bitcoin network is run out of giant server farms and the mining companies are collectively worth over $25 billion. The network can process a maximum of 7 tps.
Gordon Moore would be proud.
By contrast, Solana currently processes about 5,000 tps and can natively scale up to 60,000 tps. A new validator client, FireDancer, is solving for the speed of light and promises scaling as high as 1 million tps.
Bitcoin is like an ox-drawn cart competing against a Mach 4 jet on a trip around the world, and investors are betting money on the ox.
Why? Because some really old guys who don't understand technology have grabbed the microphone and started talking it up. Had they been around in the Henry Ford era, they would have backed faster horses against the automobile.
Don't fall for the hype.
Bitcoin vs Gold
Bitcoin is not digital gold. Gold is not a network asset. If you hold it, you hold it. I moved apartments recently and I simply took my gold with me.
Can't do that with bitcoin. You need to ask "the network" to move your bitcoin from one address to another. If the network says no, you're screwed. The miners can say no for any number of reasons:
you used a mixer
the address is under OFAC sanctions
the fee is too low (sometimes, people pay up to 90% of the tx value in fees)
the network, which only supports 7 tps, is clogged
you got on the wrong side of a giant mining pool and they refuse to honor your transaction
you added valuable data to your transaction and the holier-than-thou miner considers your data to be spam
A network asset only has value when the network itself is trustworthy. This is why the 2013 and 2017 bitcoin hard forks were so scary - they were make or break events for trust in the network. Right now, there's a lot of trust in the bitcoin network. That won't remain the case forever.
Gold is trusted by 7 billion people as a store of value. That will remain the case forever.
There is no digital gold. Just legacy tech trying to ride gold's coattails in a last gasp for relevance.
Frontrunning MicroStrategy
The top tick on bitcoin at Coinbase was $108,389 on the 17th. The 7-day VWAP peaked at $103,246. MSTR's trades are being front run. That's likely completely intentional.
During the Japanese bubble, they paid more than asking for a building just to get the transaction recorded in the Guinness Book of World Records. They bought golf club memberships for millions of dollars.
It is only when we look back that we can see it for the absurdity that it truly was. Reading history is the best defense against FOMO buying cult assets.
December 24, 2024
New Fortress Energy
Merry Christmas to all, and especially to NFE shareholders. Still long, still my no.1 position, and shares are now up 86% from the lows. High D/E companies are tricky to time, which is why my style combining fundamentals and technicals works well on stocks like this.
How to lose $6B in a day?
Michael has this quality that he can make any product sound like it will revolutionize the world. What Michael has is this magic dust, his aura and personality. That jacks the stock price up - David Folger, 2000.
Gamblers always go broke because they never learn to not repeat their mistake.
December 27, 2024
Is Japan doomed?
Japan has a population of 125 million. Because they refuse to reform immigration laws, the society is ageing by the day.
Earlier this year, I expected reason to prevail and the new BoJ head to defend the currency so their savers could retain the living standards they have gotten used to over 34 years of deflation.
But Kazuo Ueda would rather sit idly by (or play the fiddle?) and watch as Japan's savings get looted and Norinchukin Bank goes bankrupt.
All so that Metaplanet can get 1% APY loans to buy bitcoin, holiday shoppers from other countries can buy cheaper Louis Vuittons, and the carry traders can blow a bubble in US tech.
At least when a country like India adopts a policy of currency depreciation, they do so to stimulate exports, favoring one sector of the domestic economy at the expense of others.
The Japanese monetary policy is the equivalent of giving away the family silver while your own children slowly starve to death.
Is Japan going to become the next Iceland? Or will Ueda grow the necessary body parts before it's too late to save the yen?
If it were up to me, I'd replace Kazuo Ueda with Elvira Nabiullina.
December 30, 2024
From GMO Q4 letter:
"The IPO boom years of the 1980s and 1990s caused the average age of small caps to fall sharply relative to large caps. But since the early 2000s, small caps have on average become about 15 years older, while large caps have become a little younger.
All else equal, firms grow less as they age. An aging cohort of small cap firms, and particularly a substantially shrinking cohort of truly young small caps, should be expected to lead to less growth".
Looking at the data in this light explains why the Russell 2000 IWM is fundamentally broken.
The number of public listed companies has shrunk from 8000 during the dot com bubble years to 5000 today. The rise of private equity and BDCs has taken value off-market. The pie is shrinking even more when you look at share buybacks and their effect on total share count.
Everyone ends up chasing the same thing because we no longer have as many options.
A must read for commodity bulls
Facts and fantasies about commodity futures is an NBER research paper written 20 years ago, in the middle of a historic bull market for commodities driven by China's inclusion in the WTO and globalization picking up.
In the same year, Jim Rogers published Hot Commodities: how anyone can invest profitably in the world's best market.
Both the paper and Rogers' book are a great holiday read - and prep for what's coming in 2025.
ABSTRACT
"We construct an equally-weighted index of commodity futures monthly returns over the period between July of 1959 and March of 2004 in order to study simple properties of commodity futures as an asset class.
Fully-collateralized commodity futures have historically offered the same return and Sharpe ratio as equities. While the risk premium on commodity futures is essentially the same as equities, commodity futures returns are negatively correlated with equity returns and bond returns.
The negative correlation between commodity futures and the other asset classes is due, in significant part, to different behavior over the business cycle.
In addition, commodity futures are positively correlated with inflation, unexpected inflation, and changes in expected inflation".
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Good Trading!
Kashyap